Editor’s Note: This brief is part of the 2013 Brookings Blum Roundtable Policy Briefs, which details the role of the private sector in the post-2015 development agenda. Read the full policy brief here.
Private equity investments are on the rise in Africa
and, adjusting for economy size, are as important
to the continent as for the average emerging market
economy. These investments are demonstrating
profitability: Private equity deal multiples in Africa,
based on performance over the past nine years, are
estimated at roughly 8x. Equity investments can play
an important role in resolving some of Africa’s most
pressing development challenges: solving the financing
constraints facing African firms; meeting unsatisfied
demand for goods and services among the
continent’s low-income households; and ushering in
much-needed structural transformation for Africa’s
immature economies by improving firm competitiveness.
Impact investors can be especially effective.
Further growth of private equity depends on achieving
economies of scale—transitioning away from
small deal size and small size of funds. Governments
can assist by providing financing (through development
finance institutions) and enabling regulation.